08 December 2009

The New ERP – Part 21

Getting to the "system" view of technology deployment projects (continued)

Sometimes there is an even a selfish motive lurking beneath the surface of one applying the traditional approach to IT deployment projects. If the organization – whether it be your own organization, or the vendor's or reseller's – rewards those responsible for IT implementations based on their projects being on-time or on-budget rather than basing rewards on the value returned to the target organization as measured in terms of beneficial changes in Throughput (T), Investment (I) or Operating Expenses (OE), then it is not only possible, it is highly likely that there is a personal and selfish motive to how these managers plan and implement.

Now, I am by no means suggesting that managers of IT deployment should be frivolous in the treatment of available time or funds for project completion. Far from it, for from a "system" improvement point of view, delays mean reduced Throughput and additional money carelessly spent on an IT project drives Investment higher. Both of these are absolutely negative in my view.

However, what I am saying is, executives and managers holding only a cost-world view of the IT deployments will likely miss opportunities to produce even better results (in terms of T, I and OE) if they hold to the traditional aim-and-shoot approach.

The holistic value-view of technology projects

A management team with a holistic value-view of any change involving technologies should hold a much different view of the one we have described (in Part 20 and above) as the traditional IT project view. If your managers, vendors or resellers want to participate as an active partner with you in an Extended Readiness for Profit – the New ERP program, they need to have a clear understanding of all of the tools that have brought you and your team up to this point. They need a clear framework through which to view and understand what is happening across all of the departmental silos in your organization. In short, they need to understand have a "system" view, not a departmental or functional view. Working through your Current Reality Tree (CRT) with these stakeholders in your project's success should help them gain this essential footing and view.

Next, since (hopefully) no one on the project team is relying upon a set of nearly meaningless "requirements" prepared either by internal silos or external consultants, each of the team leaders should have a clear set of measurable objectives with regard to any initiative being undertaken. (A clear and measurable objective might be: "To increase the number of shipments able to be picked, packed and shipped from the current 20 per hour to a minimum of 40 per hour at current staffing levels.") These participants will know precisely how much a specific IT initiative is to deliver in terms of increased T or reduced OE. There is no guesswork about value creation under the New ERP – Extended Readiness for Profit approach.

Armed with a clear, controlling framework and measurable objectives for the IT initiative at hand, such managers are armed and able to make effective value-based judgments throughout the entire duration of the project. The reasons this is necessary are several:

  • "Today" – whatever day that is in the project – the managers have learned something they did not know "yesterday" that will affect delivered value

  • "Today" – whatever day that is in the project lifecycle – the managers do not know some things that they will learn "tomorrow," and these unknowns may also affect the value proposition of the project

  • Making changes in the immediate future (say, within a week, or a month, depending on the project) to the technology is very likely more difficult and more costly that making the same changes at some later date (the increased costs and difficulty being caused by factors such as lack of time for planning, current workloads, potential overtime pay requirements)

  • Having the liberty to make changes incrementally into the future, as the value proposition changes and unfolds, allows the managers to guide the overall IT project to the highest value optimized against the lowest total cost of ownership (TCO)
This is really where the traditional approach falls down so dramatically. If the IT initiative under consideration is going to last more than 30 or 45 days, it is almost a certainty that something will change – or something not changed, but only lately coming to light for consideration – that will affect the value proposition of the proposed deployment. New products are introduced – if not by your company, then by your competitors or your suppliers. Changes in the economy or public policy may affect the way or with whom you can or must do business. These and likely some 10,000 other factors could change the value proposition of the IT project that is underway.

This means that the "target" that you and your team were originally aiming for on Day One of the project may not be the target you really want to hit on your scheduled completion date. The value-based manager is prepared to take those revelations in stride and to make effective adjustments as soon as new estimates of T, I and OE can be made. (And, if you recall from our earlier posts, estimates of T, I and OE can be done pretty rapidly meaning no paralysis by analysis for the team.) Then, the team will apply the simple formulas we have previous supplied using the new estimates:

Benefit ($) = delta-T – delta-OE


ROI = (delta-T – delta-OE)/delta-I

The value-based manager should always understand that the value he beholds today in any given improvement initiative (technology-based or not) may not be the value of the same initiative tomorrow. The further into the future the manager tries to see, the less certainty there is that today's value proposition will still hold true.

[To be continued]

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